A lot happened during the past two weeks, and most of it fell on the positive side of the ledger. All three home sales reports covering November activity were up, although by wildly varying degrees. Home prices continued to increase, and the rate of those increases were generally higher.
Despite the increase in the fed funds rate announced by the FOMC early in December, mortgage rates have remained stable, starting off the new year with a decline of four basis points, and helping to offset increasing home prices.
While the nation was ringing in the New Year, the old one went out in pretty solid condition, at least as far as housing was concerned. Reports on October and November sales and price activity ranged from stable to WOW!
The WOW applied to November’s new home sales. For the second month in a row, the Census Bureau and Department of Housing and Urban Development reported double digit increases--although there was a catch. New home sales increased by a spectacular 17.5% from October, to a seasonally adjusted rate of 733,000. However, the 14.2% gain reported for October evaporated with its November revision. Despite that glitch, the pace of new home sales is now 26.6% higher than in November 2016.
Existing home sales were also up, the third straight monthly increase. The National Association of Realtors (NAR) said the annualized pace of sales during the month was the strongest in nearly 11 years at 5.81 million. This was an increase of 5.6% from October and 3.8% above the November 2016 rate.
Pending home sales, which are assumed to predict actual sales in the following couple of months, were also higher, but it was a squeaker, a tiny gain of 0.2%. Still, as it was the second increase in as many months, following a truly disappointing late summer and early fall, no one was complaining. The uptick brought NAR’s November Pending Home Sale Index to 109.5, a 0.8% improvement from November 2016.
Home prices continue to respond to short inventories. There was only a 3.4 month supply of existing homes on the market in November, almost a 10% decline from a year earlier against demand that is strengthening after a summer of listless sales. Three major price indices, all for October, were released over the last two weeks, and the rate of appreciation ticked up in all three. Case-Shiller’s David M. Blitzer said its National Index year-over-year increase of 6.2% was three times the rate of inflation. Black Knight and the Federal Home Finance Agency announced annual increases of 6.5 and 6.6%, respectively.
Despite rapid price gains, homes are still historically affordable, largely because of continued low interest rates. Those rates started the year by dropping four basis points to 3.95%. Ken Kiefer, Freddie Mac’s chief economist notes that while short-term rates have increased, long-term rates “remain subdued.” The 30-year rate is a quarter point lower than a year ago, and the spread between the 30-year fixed and 5/1 adjustable rate mortgage is the lowest since 2009. With inflation rates remaining low, Kiefer said, there isn’t a lot of upward pressure on long-term rates.
We’re all caught up now and hoping 2018 is the best year ever for you. See ya’ next week!
You can Log In or leave your comments as a guest.